Glacier Journal Of Scientific Research ISSN:2349-8498

EMPLOYEE PERCEPTION OF PAY SATISFACTIONON ORGANIZATIONAL CITIZENSHIP BEHAVIOR IN IT & ITES ORGANIZATIONS

Anand Christopher
Institute of Management, Christ University

Mob: +91 –9538492266
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1.1Abstract:

Pay and benefits are extremely important to both new applicants and existing employees. The compensation received from work is a major reason that most people seek employment. Compensation not only provides a means of sustenance and allows people to satisfy their materialistic and recreational needs, but also serves their ego or self esteem needs. Consequently, if a firm's compensation system is viewed as inadequate, top applicants may reject that company's employment offers, and existing employees may choose to leave the organization. With the aging of the workforce and the impending retirement of the "baby boomers," employers must be more concerned than ever before about retaining skilled, productive workers. Moreover, disgruntled employees choosing to remain with the organization may begin to behave unproductively (e.g., become less motivated, helpful, or cooperative).

Pay satisfaction is defined as the amount of overall positive affect (or feelings) individuals have towards pay (Miceli & Lane, 1991). It is one of the major factors which affect individual behavior and attitude towards the organization they work for. The effectiveness of organizations is likely to be enhanced when employees go above and beyond the call of duty to aid fellow workers in order to achieve organizational goals (Organ, 1988), and such behavior has become critical in today’s corporate world. In order to put this behavior in perspective, Organ and Singh (2007) define OCB as behavior that is discretionary, not directly or explicitly recognized by a formal reward system and that in aggregate promotes the effective functioning of an organization. Pay has become one of the most important factors that impact both the willingness of people to join an organization, and the organization’s ability to retain them. In most of the IT and ITES companies, employees show various levels of OCB. This study is aimed to see if pay satisfaction affects the display of OCB at the workplace or not.

In addition, most of the attrition in these organizations was from employees with 0 – 3 years of experience. It is therefore important for organizations to understand whether employee pay contributed to the attrition.

The objectives of this study are to:

  • identify if there is any influence of pay satisfaction on OCB at the workplace (in IT & ITES organizations) amongst employees with 0 – 3 years of experience;
  • measure the degree of correlation between the variables under study; and
  • Determine the major predictors of OCB.

The study is exploratory in nature and aims to understand the relationship between pay satisfaction and OCB at the workplace. A sample size of 200 was chosen and convenience sampling was used because of the ease of availability to ensure that an adequate number of employees from various IT and ITES companies represented the sample. The tools adopted for the study were Pay Satisfaction Questionnaire (PSQ) and OCB scale.

The relation between pay satisfaction and four factors of OCB, i.e. Altruism, Organizational compliance, Sportsmanship and Loyalty was found out using correlation and regression. The research identified a significant relationship between pay satisfaction and OCB. The four factors of OCB were found to have a significant relationship with how well a person is satisfied or dissatisfied with their pay and job.

February2015, Issue2Page 1

Glacier Journal Of Scientific Research ISSN:2349-8498

1.2MAJOR CONCEPTS IN THE STUDY

1.2.1 PAY SATISFACTION

Compensation satisfaction represents an important construct to organizations andto the field of Human Resource Management, because it serves as a critical mediatorbetween an organization’s compensation policy and relevant behavioral and attitudinaloutcomes (Blau, 1994; Lawler, 1981; Sturman & Short, 2000).

Pay satisfaction is defined as the amount of overall positive affect (or feelings)individuals have toward pay (Miceli & Lane, 1991). Beyond this simple definition, themost recent reviews (Gerhart & Milkovich, 1992; Heneman, 1985; Heneman & Judge,2000; Miceli & Lane, 1991) reveal disagreements regarding the conceptualization of theconstruct. Some researchers argue that pay satisfaction is unidimensional (Miceli, Near& Schwenk, 1991; Orpen & Bonnici, 1987); others operationalize it as having betweenfour (DeConnick, Stilwell, & Brock, 1996; Heneman & Schwab, 1985) and sevendimensions (Williams, Carraher, Brower, & McManus, 1999); others suggest thatthe number of dimensions depends on moderators such as cognitive complexity (Carraher& Buckley, 1996) and employee job classification (Scarpello, Huber, & Vandenberg,1988).

From the inception of organizational science, pay has been considered an important reward to motivate the behavior of employees (Taylor, 1911). Yet it was not until theorists began exploring fairness in social exchanges (e. g., Adams, 1963; Homans, 1961) that the specific cognitive mechanisms through which pay motivates workers began to become clear. Soon after, organizational researchers hypothesized that feelings of fairness lead to organization relevant attitudes such as job satisfaction (Locke, 1969) and, more specifically, pay satisfaction (Locke, 1976), and that these attitudes impact employee behavior within organizations (Farell & Stamm, 1988; Judge & Bono, 2001; Scott & Taylor, 1985; Tett & Meyer, 1993).

1.2.2 ORGANIZATIONAL CITIZENSHIP BEHAVIOR (OCB)

Over the years the concept of OCB has generated considerable amount of scholarly attention. This widespread interest in OCB primarily stems from the fact that OCB leads to improved organizational effectiveness (Podsakoff et al., 1996). Wyss asserts that “one of the essential behaviors for a functioning organization is innovative and spontaneous activity that goes beyond role prescriptions.” Researchers have theorised that the effectiveness of organizations is likely to be enhanced when employees go above and beyond the call of duty to aid fellow workers in order to achieve organizational goals (Organ, 1988) and such behavior has become critical in today’s corporate world. In order to put this behavior in perspective, Organ & Singh (2007) define OCB as behavior that is discretionary, not directly or explicitly recognised by a formal reward system and that in aggregate promotes the effective functioning of an organization. The behavior is rather a product of a personal decision by the employee such that its omission is not generally understood as punishable.

It is only highly satisfied employees that are likely to engage in OCB, because of a reciprocal exchange relationship (Gadot and Cohen, 2004). This assumption perhaps is derived from the social exchange theory which proposes that the type of behavior (positive or negative) exhibited by an employee is a response to the treatment they received from their employers (Greenberg and Scott, 1996). Greenberg and Scott further posit that a strong social exchange relationship between employer and employee will help maintain positive working relationships and would elicit positive sentiments in employees such as job satisfaction, organizational commitment and trust, which will in turn inspire employees to engage in OCB.

2.0 REVIEW OF LITERATURE

Pay and benefits are extremely important to both new applicants and existing employees. The compensation received from work is a major reason that most people seek employment. Compensation not only provides a means of sustenance and allows people to satisfy their materialistic and recreational needs, but also serves their ego or self-esteem needs. Consequently, if a firm's compensation system is viewed as inadequate, top applicants may reject that company's employment offers, and existing employees may choose to leave the organization. With the aging of the workforce and the impending retirement of the "baby boomers," employers must be more concerned than ever before about retaining skilled, productive workers. Moreover, disgruntled employees choosing to remain with the organization may begin to behave unproductively (e.g., become less motivated, helpful, or cooperative).

2.1 STUDIES ON PAY SATISFACTION

The debate on whether money (salary) motivates or causes dissatisfaction amongst employees has long been speculated by researchers. For example, Kinnear and Sutherland (2001) advice that employers should not be deceived that money does not matter to employees. Supporting Kinnear and Sutherland, empirical studies(Samuel and Chipunza, 2009; Tietjen and Myers, 1998) found money to be a motivating factor for employees, and serves as a ‘scorecard’ which enables individuals to assess the value the organization places on them in comparison to others as a medium of exchange. However, others (Amar, 2004; Hays, 1999; Karp et al., 1999) have argued that money has not remained as good a motivator as it was in the past.

Pay has long been considered one of the most important organizational rewards(Heneman & Judge, 2000) because it allows employees to obtain other rewards (Lawler, 1971).Frederick Taylor (1911) was one of the earliest to recognize the motivating effects of pay when he proposed that workers put forth extra effort on the job to maximize their economic gains.Although this premise lost favour in the late 1920s with the emergence of the human relationsschool (Wren, 1994), money remains the fundamental way that organizations reward employees.Yet, despite the long-standing importance of pay, the way pay impacts the behavior of employees remains to be explained.

Reinforcement theory and expectancy theory emerged as the earliest theories to shed some light on how pay influences employee behavior. Reinforcement theory (Skinner, 1953)suggests that pay acts as a general reinforcer because of its repeated pairing with primaryreinforcers. People learn from life experiences that a primary need, such as food or shelter, can be satisfied if money is obtained. Other theorists suggest that through similar experiences a drive for money itself develops (Dollard & Miller, 1950). Whether treating pay as a means to an end or as an end itself, reinforcement theory does not provide a clear explanation for how pay acts as an impetus for action. People engage in behaviors because of past experiences, but the process by which past experiences determine an individual’s future behavior remained unclear.

Vroom’s (1964) expectancy theory helped clarify how pay influences future behavior.If an individual has prior experiencewhich leads him or her to believe that a certain level of effort will lead to a given level ofperformance and that this level of performance will lead to a given outcome, that person will bemore likely to engage in that behavior, if the outcome is desirable (high valence). Vroom furthersuggests that pay motivates behavior only if valued by the employee or if pay allowsindividuals to obtain some other highly valued outcome.

Lawler (1971) provided a widely cited model of pay satisfaction (dissatisfaction). This model views pay (dis)satisfaction from the perspective of a "pay discrepancy" between what employees believe they should receive and the amount of pay actually received. Lawler's model focused on individual inputs and job characteristics to determine the level of discrepancy. Lawler argued that as pay discrepancies increase, employee effort and job performance will decrease while employee grievances, absenteeism, and turnover will increase.
Researchers following Lawler found that his model overlooked critical predictors of pay satisfaction. In particular, Dyer and Theriault (1976) argued that pay policy and pay administration were important components of pay satisfaction. Their research suggested the importance of measuring pay satisfaction along multiple dimensions beyond those provided by Lawler.
Following this, Heneman and Schwab (1979) suggested refining the term "pay satisfaction" to reflect four underlying policy areas: satisfaction with the pay structure (internal equity), with the pay level (external equity), with individual pay (employee contribution), and with the administration of the pay system.

2.2 STUDIES ON OCB

Successful organizations need employees who will do more than their usual job duties and provide performance that is beyond expectations.

Organizational citizenship behaviors (OCB) describe actions in which employees are willing to go above and beyond their prescribed role requirements. Prior theory suggests and some research supports the belief that these behaviors are correlated with indicators of organizational effectiveness.

Organ (1988) identified five dimensions of OCB: (1) altruism- the helping of an individual co-worker on a task, (2) courtesy- alerting others in the organization about changes that may affect their work, (3) conscientiousness- carrying out one’s duties beyond the minimum requirements, (4) sportsmanship- refraining from complaining about trivial matters, and (5) civic virtue- participating in the governance of the organization.

The construct of OCB, from its conception, has been considered multidimensional. Smith, Organ, and Near (1983) first proposed two dimensions: altruism and general compliance. These two dimensions serve to improve organizational effectiveness in different ways. Altruism in the workplace consists essentially of helping behaviors. These behaviors can both be directed within or outside of the organization. There is no direct link, or one-to-one relationship, between every instance of helping behavior and a specific gain for the organization. The idea is that over time, the compilation of employees helping behavior will eventually be advantageous for the organization (Organ et al., 2006).

General compliance behavior serves to benefit the organization in several ways. Low rates ofabsenteeismand rule following help to keep the organization running efficiently. A compliant employee does not engage in behaviors such as taking excessive breaks or using work time for personal matters. When these types of behaviors are minimized the workforce is naturally more productive.

Later, Organ (1988) deconstructed the dimension of general compliance and added additional dimensions of OCB. This deconstruction resulted in a five-factor model consisting of altruism, courtesy,conscientiousness, civic virtue, and sportsmanship. The definition of altruism remained much as it was, defined by discretionary behaviors that have the effect of helping a specific work colleague with an organizationally relevant task or problem.Conscientiousnessconsists of behaviors that go well beyond the minimum role requirements of the organization (Law, Wong, & Chen, 2005). These behaviors indicate that employees accept and adhere to the rules, regulations, and procedures of the organization.

Civic virtue is characterized by behaviors that indicate the employee’s deep concerns and active interest in the life of the organization (Law et al., 2005). This dimension also encompasses positive involvement in the concerns of the organization (Organ et al., 2006). Examples of civic virtue can be seen in daily affairs such as attending meetings and keeping up with what is going on with the organization in general. Civic virtue can also be demonstrated on a larger scale by defending the organization’s policies and practices when they are challenged by an outside source.

Courtesy has been defined as discretionary behaviors that aim at preventing work-related conflicts with others (Law et al., 2005). This dimension is a form of helping behavior, but one that works to prevent problems from arising. It also includes the word’s literal definition of being polite and considerate of others (Organ et al., 2006). Examples of courteous behaviors are asking fellow employees if they would like a cup of coffee while you are getting one for yourself, making extra copies of the meeting agenda for your teammates, and giving a colleague ample notice when you alter something that will affect them.

Finally, sportsmanship has been defined as willingness on the part of the employee that signifies the employee’s tolerance of less-than-ideal organizational circumstances without complaining and blowing problems out of proportion. Organ et al. (2006) further define sportsmanship as an employee’s “ability to roll with the punches” even if they do not like or agree with the changes that are occurring within the organization. By reducing the amount of complaints from employees that administrators have to deal with, sportsmanship conserves time and energy.

2.3 STUDIES ON OCB & PERCEIVED EQUITY

Organ (1988) and Organ and Near (1985) have argued convincingly that most job satisfaction measures contain more cognition than affect. The cognition component stems from one's perceptions of fairness. Persons who perceive inequity are likely to withhold discretionary behaviors such as OCB. While employees may not be able to reduce other types of inputs such as quality or quantity of work, they do have complete control over discretionary contributions. Persons who perceive equity are more likely to engage in discretionary behaviors which benefit the organization since they are not as likely to worry about whether a particular behavior is formally prescribed or discretionary; they go ahead and perform it. Scholl et al. (1987) found a correlation of .41 between a ten-item "extra-role behavior" scale and a measure of perceived pay equity. Miller (1977) found that individuals who felt underpaid declined more frequently to donate to a needy family than individuals who felt equitably paid. Organ and Konovsky (1989) found perceived equity was positively associated with both Altruism and Compliance, while measures of job satisfaction were not. Pay equity contributed most of the predictive power of the perceived equity measures while job equity contributed little additional predictive power. These results suggest that job satisfaction is not likely to contribute a significant increment of explained variance beyond the effects of perceived equity.

Early research focused on relationships between job satisfaction or affect and OCB. Job satisfaction was expected to be correlated to OCB for two primary reasons. First, due to the norm of reciprocity, people tend to want to reciprocate others who help or benefit them. Organizations or managers who create conditions where employees experience job satisfaction may cause these employees to want to reciprocate the favour. Since, in many cases, in-role job performance may be constrained, employees may use extra-role behaviors such as OCB to "pay back" their manager or organization (Organ, 1977, 1990). Second, there is ample evidence in the psychological literature that persons who experience a positive affect state tend to engage in prosocial behaviors (Clark and Isen, 1982). In the organizational literature several studies produced results which suggest a significant, positive relationship between job satisfaction and OCB (Bateman and Organ, 1983; Puffer, 1987).

Scholl, Cooper and McKenna (1987) found that pay equity correlated at 0.41 with OCB, while the correlation of pay satisfaction was 0.19. Research therefore suggests that fairness is a predictor of OCB, while job satisfaction is not (Farh et al.,1997).